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It has been a quarter-century since the Republic of Korea joined the OECD. Following the Korean War of 1950-53, Korea remained one of the poorest countries in the world for more than a decade, so becoming a member of the OECD was a dream no one dared to imagine. Therefore, the whole nation was exuberant and proud upon Korea’s accession to the OECD in 1996.
The path to joining the OECD was never easy, but rather very challenging. The complicated domestic political context made it hard to reach national consensus. As I was directly involved in the accession process, I would like to share some anecdotes and memories with the OECD.
During the final stage of negotiating the accession to the OECD, I was Deputy Prime Minister and Minister of Finance, the principal cabinet minister in charge of negotiations.
The biggest challenge in the negotiations was the issue of the capital-market liberalisation. The OECD demand for the outright liberalisation of capital markets was an unacceptable condition to most Koreans, particularly members of the opposition parties, who feared a sudden capital flight. It was then generally believed by most developing countries that the opening of the capital market would lead to a massive capital outflow, damaging the national economy in the long run.
At the time, the leaders of Korea’s two major opposition parties were concerned about this very issue. They wanted to protect the capital market at any price.
The OECD understood the predicament of the Korean public and opposition parties, that capital-market liberalisation could not be carried out at the same time as Korea’s admission to the OECD. Therefore, the compromise was to incrementally liberalise the capital market in four stages.
The chief of our negotiation team in Paris was Dr. Kim Choong-soo, the current President of Hallym University and former Governor of the Bank of Korea and Chief Economic Secretary to the President. Dr. Kim led a series of successful negotiations, including the four-stage capital-market liberalisation package, achieving the final goal.
With this package of capital-market negotiations, I moved around relentlessly meeting and persuading political leaders to gain their support for the accession bill in the National Assembly. The presidents of the two major opposition parties resisted until the very last minute, maintaining their position that they would disregard the outcome of negotiations on the four-stage capital-market opening and keep the capital market closed for some time.
Fortunately, the ruling party that advocated for Korea’s accession to the OECD had a majority in the National Assembly, and in the end the National Assembly approved the negotiation results in December 1996. Foreign Minister Gong No-myung went to Paris to sign the accession agreement between the Republic of Korea and the OECD early in the following year.
When Korea finally joined the OECD, I strongly advised President Kim Young-sam that we should not send a career diplomat as Permanent Representative to the OECD, because the position requires a high degree of comprehensive expertise on economic, social, environmental and technological issues. He graciously accepted my advice and appointed Dr. Koo Bon-young, a renowned economist and later the Minister of Science and Technology, as Korea’s first Permanent Representative to the OECD.
This has become a long tradition in Korean diplomacy as regards the OECD. Of eleven Permanent Representatives to the OECD to date, including current Ambassador Ko Hyoung Kwon, ten were high-ranking civil servants who mostly worked in the Ministry of Finance and Economy. I am sure their expertise would have served them well, and the OECD would also have greatly benefited from their extensive experience and contributions.
When I served as the Prime Minister of the Republic of Korea, we were invited to assume the chairmanship of the OECD Ministerial Council Meeting in 2009, a little more than ten years after Korea’s accession to the OECD.
On the occasion of the 60th anniversary of the founding of the Republic of Korea on 15 August , 2008, Korea proclaimed “Low Carbon, Green Growth” as the new national vision. But before long, Lehman Brothers collapsed in September 2008 and the global economic situation rapidly got worse.
In the middle of the global financial crisis, I announced that Korea would adopt the Green New Deal. This policy was an amalgam of a long-term policy of expanding growth potential through green strategies and a short-term policy of creating jobs and revitalising the economy through fiscal stimulus. In technical terms, it was a combination of a neo-classical, supply-side economic policy with Keynesian, demand-oriented policy prescriptions. The New Deal portion of the policy was designed to phase out as the economy recovered, leaving only green growth as the major economic goal. As a result, Korea was the only OECD member country that registered positive growth during the first quarter of 2009.
I was invited to chair the OECD Ministerial Council Meeting at about this time, when Korea’s green growth policy was gaining resoundingly strong support from the international community. Therefore, I was able to garner the unanimous support of the participating Minister-Delegates to pass a resolution on “the Declaration on Green Growth” on 25 June, 2009. I was told that until then, no resolution was passed but only the Chair’s Statement was published after the Ministerial Council Meeting for a long time. The Declaration asked the OECD to develop a green growth strategy; therefore, the OECD carried out a two-year, in-depth study of green growth and published a monumental document, “Towards Green Growth”. This publication was the first effort to outline a comprehensive green growth strategy on the occasion of the OECD’s 50th anniversary in May 2011.
One more episode concerns Korea’s joining the OECD Development Assistance Committee (DAC) in 2010. Having long been a recipient of international aid, from the time of the Republic’s foundation in 1948, Korea was determined to give back to developing countries what we had received. Korea’s accession to the DAC had historical significance, as it became the first country that has successfully transitioned from an aid-recipient developing country to a donor country. Korea’s accession to the DAC has also instilled great hope and inspiration to many aspiring developing countries, that one day they may also graduate from an aid-recipient to an aid-giving country.
The Korean government has a long tradition of an annual mid- to long-term budget planning session in July, with the President attending. As Prime Minster, I also attended the Budget Planning Session at the Blue House presidential office in July 2009. At the time, the Ministry of Foreign Affairs requested a drastic increase of the official development assistance (ODA) budget, which was reflected in a corresponding increase of the Ministry of Foreign Affairs budget. While the usual limit for the general government budget increase at the time was around 2–3%, the amount requested by the Ministry of Foreign Affairs was in double digits.
The Minister of Finance in charge of the Budget Office strongly objected to the drastic increase of the Ministry of Foreign Affairs budget. Nevertheless, I intervened strongly by pointing out that although the ODA budget is part of the Ministry of Foreign Affairs budget, it also represents Korea’s dedication to helping the developing world. I stressed that Korea had been a member of the OECD for more than a decade and said it was about time that Korea repaid our debt to the world by helping developing countries. The President agreed with my position.
The Ministry of Foreign Affairs eventually received all the ODA budget it had requested. Korea’s ODA in 2008, which was USD 802.3 million, or 0.09% of GNI, was increased to USD 2.5 billion in 2019, or 0.15% of GNI. Korea’s ODA budget increased by more than threefold in ten years.
Korea has come a long way from the poorest of the poor countries soon after the Korean War. A quarter of a century has also passed since Korea acceded to the OECD. The admission to the OECD was a landmark occasion in the history of Korea’s relationship with the world, particularly with the developed world. We have learned many lessons from the OECD, and hope that we have shared our development experience with the members of the OECD as well as the rest of the world.
One of the advantages as a member country of the OECD is that we can learn from the best practices of various policies that governments of OECD member states implement. I also think that peer-to-peer evaluation is a very interesting as well as a beneficial process.
Looking ahead, we are entering into an entirely new world with the COVID-19 pandemic and the rise of “untact” businesses. In the era of the “new normal”, the digital transformation may play a much more important role in furthering the values and principles of the OECD than before.
Korea is one of the most digitally developed countries in the world, with most of its population using smart-phones and being digitally savvy. Therefore, I think the role of Korea in the future of the digital OECD could become even more important. I look forward to Korea’s active role as a key digital player on the OECD stage in the coming years.
Visit the new OECD Korea Digital Hub for data and insights celebrating its 25th anniversary as an OECD member country
Read all of the OECD's Economic Surveys of Korea
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